When will SNB act?

Primary goal of Swiss National Bank's (SNB) monetary policy is to maintain price stability, however evidence indicate that SNB is failing its goal for consecutive years putting serious doubts on SNB's credibility as well as ability to move inflation to the positive side.

• Consumer price index grew by +0.2% m/m in May but still down by -1.2% on yearly basis.

• Similarly producer price index last month showed deflationary pressure accelerating. For April PPI dropped by -2.1% m/m and -5.2% on yearly basis.

Swiss disinflation/deflation have reached worst level since crisis.

• Swiss purchasing managers' index bounce back above 49 in May, but still remains in contractionary territory.

Switzerland has so far been able to maintain its large trade balance, however with stronger Franc and deepening deflation there remains doubt on sustainable recovery.

SNB sucking thumb -

SNB removed more than 3 yearlong Euro-Franc 1.20 floor on January 15^th, which according to the official was pivotal to Swiss economy.

Though it may have been logical to do with ECB launching Quantitative easing, it has done nothing but to rely on negative rates to substitute the floor.

• SNB has deployed negative libor range 0f -1.25-0.25, negative rates of -0.75% on sight deposits and amassed CHF 521 billion worth of balance sheet assets.

With rates already deep into negative and huge balance sheet of CHF 517 billion, SNB might be at its wits end while deflationary pressure on prices continue.

Franc is currently trading at 0.926 against dollar, taking cue from dollar leg.

Without bold action to fight deflation, SNB is risking it to get deeply entrenched in consumers mind.